Inflows To Emerging Markets Reach Post-2006 Peak, Can The Momentum Continue? 1

Fund flows to emerging markets

In the month of May, investors continued to pump in money into emerging market equity funds while flows into bond funds remained muted. As per data from EPFR Global, during the week ending May 31, investors plowed $6 billion into emerging market equity funds, their 11th consecutive week of inflows.

Investors remained bullish on Indian equities for the 13th week. Fund flows to Indian equities touched $7 billion year-to-date as the country’s benchmark indices touched fresh records. Foreign investors also continued to add fresh money to Brazil equities and funds, putting aside political chaos in the country. Meanwhile, outflows from Russian funds came to a halt as investors turned positive on the country after the extension of OPEC’s oil production cap.

According to the Central Bank of Egypt, the nation has received $1 billion worth of inflows since interest rates in the country were hiked. Indonesia also recorded historic inflows as S&P upgraded the country’s debt ratings. As per data from Indonesia’s central bank, inflows to the country touched Rp 108 trillion after the upgrade.

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ETFs flows

Among the exchange traded funds investing in emerging market equities, the iShares MSCI Emerging Market ETF (EEM) has seen the highest inflows YTD amounting to $1.04 billion. However, when looking at country ETFs, Brazil has received the highest inflows in 2017 so far, followed by India. Investors have added $2.15 billion to the iShares MSCI Brazil ETF (EWZ) YTD and $852 million to the iShares MSCI India ETF (INDA). The iShares MSCI Russia ETF (ERUS) has received flows of $103 million while investors have added $12 million to the Market Vectors Egypt Index ETF (EGPT). The iShares MSCI Indonesia ETF (EIDO) has recorded outflows of $106 million during the year so far, making it the worst performer among the countries reviewed in this series.

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